Chapter 25 Economics
30. Arthur sells $100 worth of cotton to Bob. Bob turns the cotton into cloth, which he sells to Camille for $300. Camille uses the cloth to make prom dresses that she sells to Donita for $700. Donita sells the dresses for $1,200 to kids attending the prom. The total contribution to GDP of this series of transactions is: A. $1,200. B. $500. C. $2,300. D. $1,100.
$1,200.
37. Answer the question on the basis of the following data. All figures are in billions of dollars: Refer to the data. GDP is: A. $116. B. $121. C. $125. D. $150.
$121.
28. Which of the following is a final good or service? A. A haircut purchased by a father for his 12 year-old son. B. Fertilizer purchased by a farm supplier. C. Diesel fuel bought for a delivery truck. D. Chevrolet windows purchased by a General Motors assembly plant.
A haircut purchased by a father for his 12 year-old son.
1. The agency responsible for compiling the National Income Product Accounts for the U.S. economy is the: A. Council of Economic Advisers. B. Bureau of Economic Analysis. C. National Bureau of Economic Research. D. Bureau of Labor Statistics.
Bureau of Economic Analysis.
39. Which of the following best defines disposable income? A. Income received by households less personal taxes. B. The before-tax income received by households. C. All income earned by resource suppliers for their current contributions to production. D. The market value of the annual output net of consumption of fixed capital.
Income received by households less personal taxes.
17. Which of the following is the smallest dollar amount in the United States? A. Disposable income. B. Personal income. C. Gross domestic product. D. National income.
Disposable income.
20. Real GDP refers to: A. the value of the domestic output after adjustments have been made for environmental pollution and changes in the distribution of income. B. GDP data that embody changes in the price level but not changes in physical output. C. GDP data that do not reflect changes in both physical output and the price level. D. GDP data that have been adjusted for changes in the price level.
GDP data that have been adjusted for changes in the price level.
24. Suppose the total monetary value of all final goods and services produced in a particular country in 2010 is $500 billion and the total monetary value of final goods and services sold is $450 billion. We can conclude that: A. GDP in 2010 is $450 billion. B. NDP in 2010 is $450 billion. C. GDP in 2010 is $500 billion. D. inventories in 2010 fell by $50 billion.
GDP in 2010 is $500 billion.
21. In determining real GDP, economists adjust the nominal GDP by using the: A. national productivity index. B. wholesale (producers') price index. C. GDP price index. D. consumer price index.
GDP price index.
31. Which of the following transactions would be included in GDP? A. Mary buys a used book for $5 at a garage sale. B. Nick buys $5,000 worth of stock in Microsoft. C. Olivia receives a tax refund of $500. D. Peter buys a newly constructed house.
Peter buys a newly constructed house.
34. Which of the following is not economic investment? A. The purchase of a new drill press by the Ajax Manufacturing Company. B. The purchase of 100 shares of AT&T by a retired business executive. C. Construction of a suburban housing project. D. The piling up of inventories on a grocer's shelf.
The purchase of 100 shares of AT&T by a retired business executive.
35. Which of the following do national income accountants consider to be investment? A. The purchase of an automobile for private, nonbusiness use. B. The purchase of a new house. C. The purchase of corporate bonds. D. The purchase of gold coins.
The purchase of a new house.
29. Which of the following is an intermediate good? A. The purchase of gasoline for a ski trip to Colorado. B. The purchase of baseball uniforms by a professional baseball team. C. The purchase of a pizza by a college student. D. The purchase of jogging shoes by a professor.
The purchase of baseball uniforms by a professional baseball team.
23. Suppose Smith pays $100 to Jones. A. We can say with certainty that the GDP has increased by $100. B. We can say with certainty that the GDP has increased, but we cannot determine the amount. C. We can say with certainty that the nominal GDP has increased, but we can't say whether real GDP has increased or decreased. D. We need more information to determine whether GDP has changed.
We need more information to determine whether GDP has changed.
6. The value added of a firm is the market value of: A. a firm's output plus the value of the inputs bought from others. B. a firm's output less the value of the inputs bought from others. C. the firm's output. D. the firm's inputs bought from others.
a firm's output less the value of the inputs bought from others.
12. In calculating the GDP, national income accountants: A. treat inventory changes as an adjustment to personal consumption expenditures. B. ignore inventories because they do not represent final goods. C. subtract increases in inventories or add decreases in inventories. D. add increases in inventories or subtract decreases in inventories.
add increases in inventories or subtract decreases in inventories.
33. In national income accounting, the consumption category of expenditures includes purchases of: A. both new and used consumer goods. B. automobiles for personal use but not houses. C. consumer durable and nondurable goods but not services. D. consumer nondurable goods and services but not consumer durable goods.
automobiles for personal use but not houses.
4. A nation's gross domestic product (GDP): A.canbefoundbysummingC+Ig +G+Xn. B. is the dollar value of the total output produced by its citizens, regardless of where they are living. C. can be found by summing C + S + G + Xn. D. is always some amount less than its NDP.
canbefoundbysumming C+Ig +G+Xn.
15. The largest component of national income is: A. compensation of employees. B. rents. C. interest. D. corporate profits.
compensation of employees.
10. The largest component of total expenditures in the United States is: A. net exports. B. government purchases. C. consumption. D. gross investment.
consumption.
40. Real GDP measures: A. current output at current prices. B. current output at base year prices. C. base year output at current prices. D. base year output at current exchange rates.
current output at base year prices.
18. The amount of after-tax income received by households is measured by: A. discretionary income. B. national income. C. disposable income. D. personal income.
disposable income.
36. Transfer payments are: A. excluded when calculating GDP because they only reflect inflation. B. excluded when calculating GDP because they do not reflect current production. C. included when calculating GDP because they are a category of investment spending. D. included when calculating GDP because they increase the spending of recipients.
excluded when calculating GDP because they do not reflect current production.
7. Net exports are: A. that portion of consumption and investment goods sent to other countries. B. exports plus imports. C. exports less imports. D. imports less exports.
exports less imports.
22. The National Income and Product Accounts (NIPA) help economists and policymakers to: A. determine which firms are likely to succeed or fail. B. follow the long-run course of the economy to determine whether it has grown or stagnated. C. measure what is occurring in each specific labor market. D. accomplish all of these.
follow the long-run course of the economy to determine whether it has grown or stagnated.
5. Final goods and services refer to: A. goods and services that are unsold and therefore added to inventories. B. goods and services whose value has been adjusted for changes in the price level. C. goods and services purchased by ultimate users, rather than for resale or further processing. D. the excess of U.S. exports over U.S. imports.
goods and services purchased by ultimate users, rather than for resale or further processing.
26. Gross domestic product (GDP) measures and reports output: A. as an index number. B. in percentage terms. C. in dollar amounts and percentage growth. D. in quantities of physical units (for example, pounds, gallons, and bushels).
in dollar amounts and percentage growth.
3. A nation's gross domestic product (GDP): A. is the dollar value of all final output produced within the borders of the nation during a specific period of time. B. is the dollar value of all final output produced by its citizens, regardless of where they are living. C.canbefoundbysumming C+In +S+Xn. D.isalwayssomeamountlessthan C+Ig+G+Xn.
is the dollar value of all final output produced within the borders of the nation during a specific period of time.
2. The system that measures the economy's overall performance is formally known as: A. national income accounting. B. business cycle measurement. C. GDP assessment. D. final output and income statistics.
national income accounting.
14. The total amount of income earned by U.S. resource suppliers in a year, plus taxes on production and imports, is measured by: A. gross domestic product. B. national income. C. personal income. D. disposable income.
national income.
8. The smallest component of aggregate spending in the United States is: A. net exports. B. government purchases. C. investment. D. consumption.
net exports.
9. In calculating GDP, governmental transfer payments, such as Social Security or unemployment compensation, are: A. not counted. B. counted as investment spending. C. counted as government spending. D. counted as consumption spending.
not counted.
27. By summing the dollar value of all market transactions in the economy, we would: A. determine the market value of all resources used in the production process. B. obtain a sum substantially larger than the GDP. C. determine value added for the economy. D. measure GDP.
obtain a sum substantially larger than the GDP.
25. National income accountants can avoid multiple counting by: A. including transfer payments in their calculations. B. only counting final goods. C. counting both intermediate and final goods. D. only counting intermediate goods.
only counting final goods.
11. In national income accounting, government purchases include: A. purchases by federal, state, and local governments. B. purchases by the federal government only. C. government transfer payments. D. purchases of goods for consumption but not public capital goods.
purchases by federal, state, and local governments.
38. Consumption of fixed capital (depreciation) can be determined by: A. adding taxes on production and imports to NDP. B. subtracting NDP from GDP. C. subtracting net investment from GDP. D. adding net investment to gross investment.
subtracting NDP from GDP.
13. Corporate profits are found by: A. summing corporate income taxes, dividends, and undistributed corporate profits. B. adding corporate income taxes and dividends and subtracting undistributed corporate profits. C. subtracting corporate income taxes from the sum of dividends and undistributed corporate profits. D. summing dividends, undistributed corporate profits, and proprietors' income.
summing corporate income taxes, dividends, and undistributed corporate profits.
19. Nominal GDP is: A. the sum of all monetary transactions that occur in the economy in a year. B. the sum of all monetary transactions involving final goods and services that occur in the economy in a year. C. the amount of production that occurs when the economy is operating at full employment. D. money GDP adjusted for inflation.
the sum of all monetary transactions involving final goods and services that occur in the economy in a year.
16. National income measures: A. nominal GDP after it has been inflated or deflated for changes in the value of the dollar. B. the after-tax income of resource suppliers. C. the total of all sources of private income plus government revenue from taxes on production and imports. D. the amount of wage, rent, interest, and profits income actually received by households.
the total of all sources of private income plus government revenue from taxes on production and imports.
32. The concept of net domestic investment refers to: A. the amount of machinery and equipment used up in producing the GDP in a specific year. B. the difference between the market value and book value of outstanding capital stock. C. gross domestic investment less net exports. D. total investment less the amount of investment goods used up in producing the year's output.
total investment less the amount of investment goods used up in producing the year's output.